Thinking Outside the Box | Article

Broken RecordBack in 1995, Michael A. Boyle, associate hospital director, William Beaumont Hospital, was in a quandary. The hospital had identified facilities management as an area where they wanted to reduce costs without sacrificing the quality for which the hospital system is known, but the traditional approaches had not yielded any solutions.

When the hospital benchmarked against other hospitals, they found that Beaumont was recognized as the standard of excellence against which other hospitals measured themselves.

“That’s flattering, but it was simply not good enough,” said Boyle. “As a non-revenue-generating entity within a hospital system, we were still compelled to reduce costs and at the same time, not upset the whole hospital employee community by doing something so profoundly different that other employee populations would feel threatened.”

The hospital also tried benchmarking against other industries but were stymied in that effort because the terms and measurements used in other industries were different. So Beaumont abandoned the traditional and reached outside the box for a solution.

BPO-An Innovative Solution

Today, Beaumont Services Co., LLC, a joint venture between William Beaumont Hospital, PricewaterhouseCoopers and Jacobs Engineering, provides the facilities management function for the several hospitals owned by the Beaumont system. PricewaterhouseCoopers manages the joint venture company.

The innovative solution was sparked when Boyle became aware of the work PricewaterhouseCoopers and Jacobs Engineering had done for Ameritech. The situations seemed similar, so Boyle approached the two companies to see if they could deliver the same benefits in the health care arena.

“They spend over a year studying us, all our processes and all our costs, and determined that they could offer us something that was destined to be successful and would significantly reduce our costs,” said Boyle. “Based on the results of that study, we entered into negotiation to create this new venture.”

The hospital decided to resource through the joint venture rather than outsource because of the potential of the concept, according to Boyle.

“There was the prospect that a few years down the road this sort of approach could be marketed to other providers,” he said, “and selfishly, we thought we’d like a piece of that opportunity.”

The venture ‘went live’ in November 1997, and Boyle said it’s off to a good start. “Our partners are promising to make significant reductions in the cost of maintaining these hospitals,” said Boyle, “and we have every expectation they will deliver. We have a schedule and targets that we’ve agreed upon, and they’re well on their way toward achieving those targets within the time frame we agreed upon.”

A New Attitude

As part of the agreement, all Beaumont Hospital facilities management employees were retained and transitioned to the new company. “So it’s the same work force, but it’s organized differently, motivated differently and compensated differently,” said Boyle. “They’ve created their own market conscious culture.”

Much of the difference stems from the employees’ new image of themselves, according to Boyle. Rather than thinking of themselves as employees of a department in a hospital, they now consider themselves facilities professionals attempting to be as good as or better than their counterparts in other industries.

“So they are driven to think more entrepreneurally,” said Boyle. “They think more in terms of cost consciousness and productivity improvement. That’s different than just being a maintenance worker in a department of a hospital — and that’s what Pricewaterhouse and others bring to the party, the training and change management skills necessary to get people to think and behave that way.”

Complimentary Strengths

Boyle bases his expectations of success on how well the strengths of the partners mesh. Jacobs Engineering, he said, is one of the largest design and construction companies in the world, which enables that company to offer the partnership a worldwide experience in contract maintenance work and design and construction. “We can reach into the deep well of resources as needed,” said Boyle, “as they also bring industry knowledge of maintenance standards, design standards, and so forth.”

In their management capacity, PricewaterhouseCoopers brings to the arrangement not only the training and motivation of employees that Boyle noted earlier but also what he called ‘intellectual capital.’ “A lot of the good ideas, the accounting practices, improvements in scheduling, work planning, documentation, productivity, measurements — these are just a few of the things that Pricewaterhouse brings,” said Boyle.

The People Factor In BPO

William Beaumont Hospital has been ranked as one of the best places in the country to work, so it follows that the management is very sensitive to human resources issues. That remained true in dealing with affected employees during the transition to the joint venture.

“This was a profound change in their professional lives and careers,” said Boyle. “Change is often perceived to be bad, even though it’s good, and we’re no different. Through some very high quality professional work on the part of our partners, we were able to transition that work force of over 300 people successfully without an uprising or major unrest. There was unease and anxiety, but after 11 months of experience, most of that anxiety is gone.”

A challenge remains in departments where some support work, previously done in-house, has been moved to the joint venture company. Some people in those departments, now faced with finding other work to fill that void, are still questioning why the hospital found the joint venture necessary.

“The answers to those questions are not universally understood,” said Boyle. “It takes time, a lot of communication and education, but we’re getting there. Over time, we believe that will abate.”

The Future of BPO

Boyle believes that more and more companies will turn to business process outsourcing as a way of doing business. “I believe any industry needs to concentrate on its core business. In the health care industry, that’s certainly true.”

He noted that the health care industry is ‘in everyone’s cross-hairs’ these days in terms of driving down costs while delivering quality care. A potential solution to responding to part of that pressure is BPO, according to Boyle.

“Our industry, as well as any, needs to look at the things they don’t need to do themselves and ask somebody else to do that function for them, particularly if it can be done as well or better and at a lesser cost.” he said. “You have to drive down your fixed costs because you can’t always control your variable costs. But the cost per square foot to maintain a place or the cost per square foot to design and build a place or the cost per work order to maintain equipment — those are some things that can be improved. And it’s my belief that most of the best ideas for improvement come from outside your own industry.”

Lessons from the Outsourcing Primer:

  • Out-of-the-box thinking can lead to successful solutions.
  • People issues are extremely important in a successful outsourcing of a business process.
  • Resourcing can spark new opportunities and enhanced self-images among affected employees.
  • In a joint venture, success can depend upon how well the strengths of the partners mesh.
  • BPO offers an alternative to companies faced with competitive or cost containment pressures.

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